The number of UK residential transactions totalled 94,680 in January, marginally lower (less than 1%) than January 2025 and 5% lower than in December, the latest HMRC statistics show.
On a non-seasonally adjusted basis, transactions were 3% lower than January 2025 and 24% lower than December.
Hamza Behzad, business development director at Finova, commented: “A slower market is no cause for alarm, but it may point to a lack of momentum. Despite a strong choice of low-deposit mortgages, and a base rate at its lowest level since early 2023, affordability pressures and economic uncertainty are weighing on buyer confidence.
"For many households, improved product choice alone isn’t enough to offset higher living costs and tightening household budgets. However, there is ray of hope. Big market players are cutting rates by up to 0.2% and these rates could edge down further in March.
“As rental prices climb and rates ease, monthly mortgage repayments are now comparable to, and in some cases lower than, the cost of renting. For first-time buyers who were previously priced out — and for movers who paused plans during economic uncertainty — the equation has changed. While some will still struggle with affordability, buying is becoming a more realistic option.”
Mark Harris, chief executive of mortgage broker SPF Private Clients, said: “Lower mortgage rates continue to support activity in the housing market. Since the Budget, there has been a strong level of enquiries with application levels very similar to those seen in January 2025.
“The chances of a further interest rate cut this month have improved following recent economic data including rising unemployment, falling inflation and lacklustre GDP, which should provide a further boost for market activity."
Jason Tebb, president of OnTheMarket, commented: “Although this transaction data reflects the uncertainty created by pre-Budget speculation, resulting in a particularly challenging period for the housing market, that is now behind us. On the ground there is evidence that the market has turned a corner.
"Post-Budget clarity, combined with lower mortgage rates, should lead to an improvement in transaction numbers which are a better indicator of the overall health of the housing market than prices.
"The increase in sellers bringing their homes to market this spring will keep prices in check to an extent, which will further assist first-time buyers and boost transactions. A further interest rate cut, perhaps even this month, will strengthen the market and encourage those planning to move, enabling them to plan ahead with more confidence."
Ian Futcher, financial planner at Quilter, added: "Residential transactions ended the year on a steady footing and the market now looks increasingly sensitive to what happens with mortgage pricing over the coming months. December’s seasonally adjusted total slipped by less than 1% on the month to 100,440 but remained 5% higher than a year ago, which is broadly consistent with the stable pattern we have seen since the summer. The non seasonally adjusted figures tell the same story, rising 1% on the month and 7% on the year, despite stretched affordability.
"The direction of mortgage rates is now central to whether residential activity can break out of this tight range. Lenders have already been trimming fixed rate deals in anticipation of Bank of England cuts later this year, and the market is increasingly priced for a gradual easing cycle. If inflation continues to cool, there is a realistic prospect that average mortgage rates could drift lower through the spring and summer. That would gradually improve affordability and could release some of the pent up demand that has been sitting on the sidelines since early 2024.
"For now, though, households remain cautious. Buyers are waiting for clearer evidence that further rate cuts are approaching and that any downward momentum in mortgage pricing will be sustained rather than tactical. The resilience in December’s numbers suggests transactions are being driven by need rather than opportunism, but an improving rate outlook would provide exactly the confidence boost required to lift activity out of its holding pattern.
"The opportunity for the market in 2026 is that even modest reductions in mortgage rates would have a disproportionate confidence effect after two years of elevated borrowing costs. If the rate path moves in the direction many expect, today’s stability could finally tilt into a gentle recovery."
